Moneyflow

Assuming that most people here are in favor of digital content
distribution (read: 'Napster', 'gnutella', etc.), has anyone actually
come up with a model to get some money to content creators? I
think they have a right to it.

I'm a little tired of people bashing the companies for trying to protect
their business models but at the same time not presenting an idea on
what to do instead. I'm not fond of the MPAA or the companies but
I do like artists and I think they need to be paid or
we won't get the content we'd like. At the moment, the established model
is the only way of this happening. Sad, but true.

Actually, musicians are probably the worst example: They have the option
of giving concerts or similiar live performances and distributing their
music could be seen as advertisement. Thats not true for writers,
though. Not many people I know of prefer a lecture to actually reading
the book.

What are we to do? Is the whole model of producing content for
money
outdated? Should we look for other means of sustaining content?
I'm not
really sure thats the best way. For one thing, the current model for
free content is advertisements (mainly in television and in web-sites)
and I don't really like that either.

About the only thing I can think of is paying for the
medium, that is,
for having bits delivered to you (in the case of pull media like the
web) or getting bits sent (in the case of push media, like e-mail). This
has some advantages, e.g. spamming would be a very costly practice
:),
but it would mean that instead of just using the money to pay for their
infrastructure, infrastructure providers would have to make deals
with
content providers to get them their share of the money. Privacy
is also
an issue -- I don't really want my ISP to know which newspapers
articles
I read -- but all in all, it seems like a workable model to me, after
the initial problems have been solved.

I would be quite interested in hearing other peoples opinion and it
seems quite odd that nobody has researched in this area so I'm assuming
that I just didn't find the papers. Anyone who has usefull pointers to
info on this matter is requested to post a few links. Thanks!

i go on the warpath the day that the internet goes "pay-per-download"
the world over. and these stupid WAP manufactures - with their charges
per page - will be my first target, _if_ WAP takes off and other
moneygrabbers start forcing legislation that the internet must be paid
for etc etc, you get the picture.

that having been said, i would love to be able to sell / write my book
on-line. the only reason i haven't placed it up on a site anywhere yet
is so that no-one rips it off.

possible half-way-house solution: i look forward to the day when it will
be possible to walk into a bookshop, say, "hi i'd like joe blogg's
latest novel, please". and they print and bind it with the latest xerox
printer in the store, while i sit in their cafe for half an
hour. they download the latest from a secure website or off a DVD (or
holographic storage if it comes to that) and everybody's happy: me, the
author, the publisher, the bookstore.

It requires micropayments (as my brother-in-law, a street performer,
will tell you, you'll get a lot more money in change than in paper
bills, especially if there are nice big coins like the Canadian looney
and twoney and the new American gold dollar).

Tipping is something that could be built on top of Mojo Nation. Mojo Nation has digital
tokens, which aren't used for micropayments (despite the widespread idea
that they are, due to an announced but then abandoned plan to
use them
for micropayments), but for distributed load balancing. But the same
digital token technology could easily be used as micropayments
to remunerate artists via voluntary contributions. You'd just need
someone to issue and redeem the tokens in return for real money.

lkcl: The major argument I have heard so far against
pay-per-view is that repeat visits should not require repeat payments.
Well, thats exactly why I suggested pay-per-bit -- a request to check if
a resource has changed is very small, therefore it costs practically
nothing. If you have any more arguments against this, I would be very
interested in hearing about them.

Zookoo: I don't know about the customs where you come
from, but here in germany not many people can live from tips.
Additionally, tipping is
something very personal, I'm not sure wether its workable over an
essentially anonymous and faceless network.

I am an advocate of pretty much the exact opposite point of view. I
am of the opinion that the infrastructure should be viewed as a
commodity and be maintained without profit motive. (by infrastructure I
mean software and protocols that allow information transferral and
usage) We pay content creators directly by micropayments. This way, we
are able to directly contract with the artists themselves, and there can
be competition amongst content creators. There is also no middle man
overhead, so artists get more, and consumers pay less. This works the
same way for value-added services, etc. The infrastructure needs to be
open and free for this to work though. I liken it to the rail system,
or the road system in the US. They infrastructure is maintained by tax
money, and all companies have equal access to provide consumers with
goods and services on top. This seems like a smart way to go.

Yes, tipping is a social activity. If you are not face to face it is
less likely to happen (this is especially true in street performing as
their job is often to humiliate you [directly or subtly] until you give
in to the social pressue of tipping). I like the concept but (as Zooko
already knows ;) I'm a big skeptic on whether or not it would work to
generate a useful amount of revenue in anonymous situations like the
net.

The other point in support of Zooko is that if you don't overcharge for
things and make is
extreemly convenient for someone to come to you, pay a small amount, and
get the bits they want (songs seem to be the example of the day) rather
than go get it for free with a little more hassle elsewhere, people will
come to you.

how does one finance the creation of digital content? a very
pertinent question indeed for the advogato audience. as the
internet runs on our software (kinda true :), we advo's have the
ability to provide next generation payment infrastructure to artists,
to information producers, etc. this is a nice intersection of the
power of software and real-world needed solutions. but enough
idealism...

often it is of little market value (say $.01-.$.25 range -- credit
cards don't *do* that low of amounts)

"intellectual property" protection is rapidly becoming a pipe
dream (it is trivial to both copy and widely distribute digitial works)

so solutions need to address both issues.

micropayments , the ever popular solution to the first problem,
hasn't yet materialized . but i'm quite certain
micropayments will arrive sometime soon. That is, as soon as
technologists work together instead of trying to lock each
other out of this already difficult chicken-egg problem (adoption of
micropayment technology with producers AND consumers). it's
time for an ietf-flavor network payment protocol.

the second issue is rooted in the traditional ip business model.
the traditional ip business model goes something like this: i
create x, i give you my x for $y dollars, you cannot give your copy of x
to
anybody - they have to buy from me. in this environment, creators
are (rightfully) terrorified at the possibility of selling a single
legitimate copy of their content and then everybody else gets the
content from another source. i think this is called the 'sale of one'.
a trend we're seeing today is that
people don't respect that notion of "intellectual property". business
models should take their heads out of the sand and adapt to this
new environment. business models sans ip is very interesting
imo.

a few possibilities:

tipping (using micropayments) ... too optimistic in my opinion
but it has its place (free software financing i would place here as
well as amateur music financing)

traditional payments but with the efficiency savings gained
from the distribution infrastructure already in place (the Net)
transferred to the good's cost (micropayments here for a lot of
things that are mass-market, music for instance)

my favorite... the also semi-famous street
performer protocol (using micropayments) in which the
money is made before the work is released.

i would love to see an example of the street performer protocol
working - steven king's (sp?) little abandoned, half-done
experiment doesn't count either! i think an open source project
would be a great candidate for funding using this approach...
whatever. back to the topic at hand.

notice that almost all of the above possibilities outlined above
depend on a (micro)payment infrastructure. i'm looking forward to
the time when i (we) no longer just write about a vague notion of
future commerce technology but instead actually deliver some
protocols and code to 'fix' this bug.

hope this rambling makes some sense and is helpful to you. :) if
not, i'm sorry.

I think we've been brainwashed by the "entertaiment" industry to think
about the world in terms of "content producers" and "content consumers".
But this is wrong. In the digital/internet age everyone is a "producer"
and "consumer".

What you reading now is "content" I produced, and no one is paying me
for it. The most interesting stuff around the internet is not the stuff
produced by the "industrial content machine", but by people like posters
here. No one pays for its creation.

Some of the current bussiness models (like the music business) are
based on distribution of physical media. The ease that replication of
digitized information makes such models obsolete.

But people will continue to produce music, writing and other art - as we
have through history, for the purpose of communicating with other
people. For example, look at mp3.com website - how many musicians have
put their music up there? How many do you think live of the money they
make from MP3.COM sales?

I hope that in the future the distinctions between the professional and
amatuer musicians, writers and other artists will simply disappear.
Perhaps more people will study music and learn to perform with their
friends instead of depending on the marketing department of some large
record company.

How will artists make a living? They'll get jobs - just like the rest of
us. The idea of "royalties" is prepostrous. We should be rewarded for
actually working, not for sitting around doing nothing.

And please don't tell how "creative work" is hard. I spend my days
writing software and a lot of my code has been in production for years
(some longer that 15 years), I don't get any royalties for the software
working, so why should a musician, who spent less time and effort,
writing
and recording a song get money for it for the rest of his life?
Especially if the distribution and copying costs him nothing?

Sorry for somewhat disorganized thoughts, but I've been working hard and
I'm tired...

...richie

P.S. Meanwhile I've been re-learing some classical guitar pieces that I
knew long time ago. At some point I'll record them and put the MP3 files
up on the web. You can all have them for free...

How about project of S. King? He put his book on web for unlimited download,
but noted how to pay him $1 if you like this book.
He likes the results it brings to him. (~80% pays afaik).
(But you need to make it easy to pay - just a click).

mattbradshaw: Thanks for the anti-micropayment link! It
raises some very good points about why using micropayments concurrently
with content consumption can't work and I tend to agree. However, I
almost completely disagree with the discussion of alternatives.
Advertisements are widely disliked, too, and while aggregation indeed
offers a bundling advantage, it can only be taken so far until users
feel cheated. It also doesn't really offer a solution for the copying
problem: If I take the content and publish it unaggregated and without
advertisement, no one can make me stop.

Thanks again for pointer to the street performer protocol. This is one
very cool paper -- it neatly sums up most of the discussion I had
expected here and also puts copyright into perspective. I had vaguely
heard of it before but now read it for the first time. Its also the
first thing I've seen that actually has a sound model where all roles
are clearly defined. Do you know if anyone has actually implemented
something based on it? About the only problem I have with it is wether
it will work (especially on a global scale!) -- and that remains to be
tried, doesn't it? :)

RyanMuldoon: The problem with your proposition is that
it can't be enforced. No one can stop me from paying once, then copying
and distributing the content for free. Legal and technical means of
preventing me from doing so are doomed from the outset -- or they will
create a big brother world.

richieb: While I tend to agree that the current
copyright model is fundamentally flawed (especially after reading the
street performer paper), its unfortunately not that simple. Its one thing
of saying that the model is flawed and another thing to actually propose
something better. If it would indeed be the case that artists would have
to get a "real" day job in order to make a living, the amount of music,
writing and art would sharply decrease. You are quoting history, well
then look at it: Do you really think that a hundred years ago the
situation for artists was as good as it is today?

Royalties are an example of a different charging model. You propose that
things should be charged by the amount of work it takes to produce them.
There is also the model of charging by the value it has to the people
who want it -- and thats what royalties reflect. I'm not sure whats
better or more natural, both models have merit.

i am really enjoying this discussion. as i'm just now in the process
of writing some proposals in this same subject matter, this is great to
refine my ideas. thanks for starting the discussion!

richieb: i agree that everybody is a producer and consumer but that
doesn't erase the issue of whether or not there needs to be a means to
finance that production of information. that fact (everybody is
creator) should increase our desire to allow creators to be rewarded
for their effort.

re: instances of the street performer protocol being used...

the closest thing i can think of is stephen king's book, "the plant".
it, however, wasn't a *pure* example of the protocol. king insisted
that a certain percentage , say 75% or so, had to pay the $1 or
else the next chapter wouldn't come out. in a pure street performer
protocol implementation, the creator would simply set a threshhold so
some could carry more weight. i think that works better. btw, king's
project looks to be on hold as i just checked the website . it does
look to show some promise though, in their
income/expense report .

back to micropayments... :)

in my last post, i don't think i clarified the point enough, if the
street performer protocol is to work, individuals need to be able to
chip in small amounts - $0.25 -ish amounts. lots of people wouldn't
think twice at providing that kind of small financing - if it were
easy. i think it would really scale and help. micropayments are so
needed!

the problem(s), as i see it, is that there is no widely adopted,
secure, and convenient payment alternative to credit cards available.
why not? no ietf-standard -> therefore no implementation that would be
helpful (mozilla, ie) -> therefore no content producers doing it ->
therefore no consumers using it -> therefore we're still stuck in the
dark ages of payment technology (using ads when the marketvalue is low,
subscriptions and the like). the credit industry sponsored set payment protocol has strong
benefits, but it carries a lot of the baggage of the credit industry.
however, i think we need to steal the set idea of the dual
signature. anybody aware of patent issues here? ... to do
micropayments (as opposed to traditional payments) we need a divorce
from the credit card industry. the risks they take and their enormous
staff require quite large overhead charges for each transaction.
micropayments have to be so darned efficient - not many people
(automation is a lot less expensive than salaries), no risk, ... what
i want, is banks
to provide a debit like functionality with the click of a link .
basicaly atm machines version 2. also wanted is a simple interface
.

as i mentioned earlier, i think that the foundation of micropayments
has to start with a standard payment protocol. i halfway designed a
quick 'n dirty draft in the last year. but i'm not too fond of its
form right now. if i ever get time, i would very much like to polish
it. but surely (!) there exists another payment protocol that's
already done. here's some starting points that i need to
investigate... iotp from the ietf. at first glance, however, it
looks too complex to achieve commodity
protocol status. we *need* simplicity. please let me know if you
have found anything better. thanks!

where do we (the free software community) fit in? when the payment
protocol exists, we need backend tools to make it easy to establish a
new broker/bank. we need to make it easy for the content providers by
augmenting familiar tools (apache, zope) with payment functionality.
we need to make it easy for the consumers by providing the client end
in any app where it might make sense (mozilla, galeon, xmms, ...). we
also need to push the idea of next generation payment technology.

I saw this linked on the fairtunes page. I'm not up on micro-payment
technologies, but it seems decentralization is very desirable
characteristic of a micro-payment protocal. Espescially if we want more
money to go to the artist and less to the parasitic entities.

nelsonm: "The trouble with micropayments is the transaction cost
usually exceeds the value of the transaction itself."

i respectfully disagree. :) the entire point of
micropayments is to deal with the situation you describe. micropayment
infrastructure must route around traditional inefficient transaction
channels. not to say that it's easy to do a secure, quick, and
conveinent transaction for less than a cent, but it is doable.

i'm very new to the financial services industry, but it appears to my
newbie brain that a significant chunk in the tranaction costs for the
credit card companies is found in the risk they take on. "will this
person pay this month, or ever?" the visas of the world spend a lot of
energy making sure they get their money. lots of paperwork, lot of
phone calls, lot of collection agencies, ... i think one can save a
lot by simply moving to a debit model. let the computers do the work.

granted, there does exist a certain cost to any transaction, no matter
how efficient. so there will (still) be a point at which "the cost of
the transaction will exceed the value of the transaction" when you
bring that value low enough. but that's ok. as long as we bring the
transaction costs down a bit so we can open up the market a bit.
there's a whole lot of stuff that $.01 - $.50 is useful for :
donations, something to throw in a street performer protocol fund,
webpages sans advertising, music, etc. i honestly am not all that
concerned at present about a market operating in the $.00001 range.
it'd be interesting to actually do the math here and figure out how low
we can bring the transaction costs.

I prpose a system by which you can by copies of music signed to you
by the author. This signature is easily verified, and not hard to
remove. It will be next to impossible to seperate the artist's
signature from the information that you are the owner.

You can then make it a crime to give away signed copies of a work,
and you are traceable through the signature on the work. You can, of
course, give away and trade unsigned copies, but there will be a social
stigma attached.

One way help along the social stigma aspect is to make it possible
for someone to provide verification that they have a signed copy by
giving someone an unsigned version, and a token that can be used to
verif that they have a signature. You could even make this process of
verification an automatic feature of a P2P system. This would permit
people who have signed copies easily share their entire collection in an
unsigned format. It would add a certain potlach aspect to the whole
thing.

All this would rely on easy support by the P2P infrastructure, but it
wouldn't require that technology be crippled. Owning a non-comforming
P2P peer would simply mean that it would be hard for you to participate
in the social fabric.

You would still have warez communities, and people would still get
stuff from them, but they would have a vague, socially reinforced
feeling that they were somehow cheating someone out of something.

It would also allow for a much more natural degredation of copyright
rights. People would eventually just feel that the work was really old
or the creator wasn't around, and so wouldn't feel guilty about having
unsigned copies. Though signed copies may then start being treated with
a great deal of respect and awe. Especially if they couldn't be
obtained because the work was no longer 'published'.

You could even have another level of 'personally signed' copy. This
would be a copy an artist directly gave to someone, proving the person
had some sort of personal interaction with the artist. If the artist
abused this and used the 'personal' signature for impersonal
transactions, the value of the signature would devalue.

I really like the idea of voulentary micropayments. I wouldn't think
twice about paying 10 or 15 cents (or more) for a web page or an MP3
download or to Free software projects. On the other hand, I don't like
the idea of having a proprietary third party be required for such a
transaction. As cool a Paypal might be (I havn't used it) They still
take off the top--which is fine as they are providing a service, but I
don't think it is fine in the long run for micropayments.

I think a better solution would be for national treasuries & mints to
look into the problem. The reason money is handeled by governments as I
understand it, is to allow for comerice to be consistent and fair within
the country. Now that so much commerice is going on electronicly, it
seems only right for governments to create a standard way for people to
cary out transactions.

Some of my best work has been done for non-monetary reward.
Recognition, satisfaction, use of the result. I'm a big fan of having
the resources necessary to obtain food, shelter and random technological
artifacts, but when you pay people in that way for services, it produces
unintended effects as well. The recent tech boom has illustrated this
quite effectively for much of the free software community. Distortions
do occur.

Not implying I have the answers, just pointing out that the way
people are compensated for their efforts has an effect on the character
of those efforts. This has to be figured into any economic model.

Actually, musicians are probably the worst example: They have the
option of giving concerts or similiar live performances and
distributing their music could be seen as advertisement.

I like to listen to the Techno/Trance genre of music, and there are only
a few live acts, the majority is studio work - so public performance is
not an option for these musicians.

Interestingly enough a couple of DJs makes a quite a buck with their
live mixes of these musicians, a role similiar to a Linux distribution
vendor. :-)

I continue to my buy my samplers, because that kind of music is played
very rarely on radio, and I want to support the musicians.

A last thought is that most musicians probably can't make money like
programmers do - having a day programming job and releasing some free
software in their spare time - except they are members of a public
orchestra (which might be unlikely for Techno/Trance artists :-)

I have to disagree with leaving this up any particular government, they
will most definitely want a centralized system in which they are in
control of the system.

The main problem it seems for micro-payments, aside from techincal ones,
is in creating aggregators and getting them to adopt a specific
protocal. It's seems like banks would be in an apt position to provide
aggregation services.

Frankly, I don't buy into the abundance argument. Sure, bits are
abundant but creativity in any form is not. Therefore I think
that the gift economy theorists don't have a case. Air is also an
abundant resource but that still doesn't mean you can suddenly chop up
all the trees and hope that it stays that way.

Relying on voluntary contributions is a risky thing
IMHO, even when a social stigma of some sort is attached. For one thing,
attaching ones own social rules to the world as a whole is not only next
to impossible but its also morally suspicious to do so. You also suffer
from the freerider effect: While some people will feel inclined to pay
at first, others will enjoy a free ride and in contrast to proposals
like the street performer protocol, the voluntary approach has
no safeguards from stopping that. Over time, this will
make the paying people feel cheated and question their incentive to pay.

Regarding micropayments, a very important distinction
has to be made: On the one hand its about having an easy-to-use
infrastructure for electronic payments that doesn't have a fixed
transaction cost but a percentile based cost, therefore making
transactions that previously were in the order of the fixed cost viable.
I think everyone would like that, however, its just a tool, not
a solution. The other thing commonly associated with
micropayments is the ability to pay-as-you-surf, i.e. you just click a
link and the payment is done automatically. That on the other hand is
something entirely undesirable (as outlined above and in the links
mattbradshaws first posting contains) and also completely useless for
the case at hand because its unenforcable (I can still copy and
distribute without paying).

All in all, I still think we only have two proposals that are
economically sound:

i'm really wrestling with the voluntary vs. mandatory payment issue.
which works better? i think something absent from our discussion, thus
far, is the end goal of the artist' work/content. here's some
stream of conciousness scribbling.

artists (producers, content creators, whatever you want to call them)
have several goals while doing their thing. examples include:

making the most money

getting their work out to the most people

balancing the above - getting their art/message out while still
being able to pay the bills

other stuff i can't think of cause i'm tired

a few days back, i was a bit surprised reading a napster debate in a
christian musician rag. i found a handful of christian musicians
(whatever that is... another story :) wholeheartedly supporting napster
simply for the fact that 'getting the message out' was a higher priority
to them than getting a buck from a record sale. tipping would be prove
to be very appealing to this crowd. no limitations in getting the music
in the hands of anybody who wants it. and there would be still be some
income possibilities. another example would include the free software
community. often it is the goal to provide software to everyone, poor
kids in third world countries, etc.

in most instances, though, perhaps the primary goal is making as much
money as possible. after thinking about this, it isn't necessarily
mutually exlusive with voluntary payments. as the content is more
widely distributed under a voluntary payment scheme, it serves as free
advertising and could lead to more 'tips'. and it would be a shame,
when operating under a mandatory model such as the street performer
protocol, if the threshold is unmet and nobody received the content AND
no one received any income.

the conclusion i'm coming to is basically that both models are useful
for different circumstances. let the artist choose which serves them
the best. i'm thinking it'd be pretty sweet to have a content
management system give the artist a toolset. click this button to use
the street performer protocol (mandatory payment) model. click this
button to use voluntary tips. different strokes for different folks.

i believe the system is doomed to failure as a result of the enormous
burden it places on the aggregator(s). collecting promised
micropayments is so very difficult. especially without a network
payment protocol and having to rely on an expensive traditional
transaction cost. i'm also not really sure why
several different brokers using the same protocol wouldn't be a better
form of decentralization. the final nail in the coffin of the protocol
is the ease to which is permits attacks on aggregators. the same signed
receipt could be sold to several aggregators. it was an interesting
read though. and perhaps i've misread the details.

The aggregators could work in a number of ways which would be
economically viable. They could work purely on credit, you deposit a
certain amount of real money to the aggregator and when an artist
redeems his micropayments the transaction would be automatic,
automatically withdrawing the proper amount from your account and
depositing it in the artists account possibly at a different aggregator.
Say you didn't have enough money, they might pay anyways but give you a
fine in the process. This operation will vary from aggregator to
aggregator, but it would be assumed that aggregator would operate in an
economically sound way. Most likely the proccess would be automated to
reduce tranaction cost.

Also, I think once a decentralized micro-payment infrustructure is in
place, you could implement a number of protocals on top of it. Some
artists might prefer potlatch, others might prefer street preformer, yet
other might prefer another protocal. I have to admit I don't know
whether voluntary payments would work in practice.

"i'm also not really sure why several different brokers using the
same protocol wouldn't be a better form of decentralization."

I assume the brokers would handle payment in this system.

"the final nail in the coffin of the protocol is the ease to which is
permits attacks on aggregators. the same signed receipt could be sold to
several aggregators. it was an interesting read though."

I don't understand this, maybe you mean if aggregator had to track you
down for you to pay. I assume for the system to work you would have to
have a designated aggregator chosen by you. Therefore the receipt would
only be good for that aggregator.

Jim Carrico of potlatch.net contacted me and mattbradshaw by e-mail,
pointing out that potlatch is not just for voluntary
contributions but can be a generic micropayment system. I
encouraged him to sign up here, well see what happens. He pointed out
that potlatch is not meant to be the all-fullfilling solution
but rather serves a specific need. In that light, and after re-reading
all the stuff, potlatch looks much more interesting (to me) than it did
at first.

mattbradshaw-Clarification: Sorry, that sentence really
wasn't very clear. What I basically meant is that the basic difference
between normal payment and micropayment is that normal payment
methods take a fixed cut, say 5 cents of every transaction, which is bad
if you just want to pay 5 cents or even less. Micropayments usually take
much less and from what I've seen, it seems to move to a percentile
based system, so instead of just going to, say, 0.005 cents, it goes to
1% of the transaction, therefore making it suitable for really micro
payments. None of this -- and that was my point -- has anything to do
with pay-per-view, which is unfortunately often attached to the concept.

Paying for the medium is a very bad idea. In this system, we would
institutionalize third-party distributors. That makes people like the
RIAA and MPAA permenantly in charge, which is probably the last thing
that we want. It also encourages proprietary file formats, which will
build-in copy protections. This is also a very bad idea. We will have
technological impairments on Fair Use, and all sorts of extra headaches
that we just don't want to deal with.

The whole cool potential of the Internet is the person-to-person
distribution model. We are supposed to be able to remove the need for
big businesses and assorted third parties to publish our own creative
works. So, we need a solution that makes the infrastructure a
commodity, and moves value over to the actual content. How do we do
that? Have contracts with the creator and consumer directly. Some
creators can have mandatory micropayments to get at content, while
others could go for a "tip jar" method. It needs to be simple to do,
and it needs to be consumer-oriented. Making mandatory systems that
have stringent copy protections is just asking for a warez culture to
develop. Having a system that is meant to encourage quality work and
consumer satisfaction is the only thing that can succeed in my mind.

This means several things. First, it really does require open
protocols, file formats, and (ideally) operating systems and software.
Why? We need to level the playing field so the little guy has as much
opportunity to create and publish as the established players. Ideally,
we need a better method of information searching and categorizing -
much-enhanced metadata. That way consumers can *find* the little guy's
work if he or she makes something of interest. Then, we need a simple,
standardized "tip jar" system to pay content producers.

I think that the biggest reason that micro payments haven't worked so
far is that each time, you have to fill in your credit card information,
etc, to pay someone 25 cents or a dollar. That's just a pain. A
secure, but easy to use mechanism where all of your information is
already stored on your computer, and you just type in a password, amount
and click on a button to send the payment to any distributor. That
would be much more convenient.

Furthermore, if we enhance the metadata system, no matter how we get
the file, we can see who the original content creator is, and send them
a tip as we see fit. The reality of the Internet is going to be
filesharing. There isn't going to be a way to control or stop it,
because it is just too convenient. So we may as well embrace it, and
take advantage of what it has to offer. If it were simple, I'm sure a
lot more people would pay what they see as a reasonable amount for
various things, be it songs, software, or interesting texts.

The problem with micropayments is that the transaction cost exceeds the
value of the item being told. By transaction cost, I'm referring to
everything that hinders the purchase of something. Everything involved
in getting it from the seller to the buyer. There are multiple parts
to a typical transaction cost, but the one that dominates is human
attention. Human attention is the only commodity that has been going up
in price over the long term. Everything else has been going down: the
cost of trusting a vendor, the cost of money, the cost of safely
transporting the item home.

You can't wave this problem away by saying "Oh, but these transactions
are going to be for hundreths of a cent. People will always click yes
without thinking about it." Um-hum, sure, and people never have huge
long-distance bills that give them a heart attack. The whole point
behind micropayments is that they're supposed to add up for the vendor.
Well, if they add up for the vendor, they're going to add up for the
buyer as well.

So every purchase needs human attention. You have a similar problem
with venture capital. VC's only want to lend out millions of dollars.
That's because every investment takes some of their attention. They're
only willing to spend that attention if it's going to be worth their
time. Sure, they could make lots of small investments, each with a big
risk of being totally lost, but then what value do they bring
personally? They can't bring any, because they can't split their
attention that many ways. And if they bring no value, in the long term
the free market will squeeze them out.

Go read Clay Shirkey's article, linked above, by, um, you. Didn't you
read the article that you linked to? I think he puts forth a pretty
good case for the failure of all previous micropayment schemes.
-russ

nelsonm: i have indeed read clay's
article and disagree with him. :) i thought it would be nice to
display the opposing view , if nothing else but to refine the
ideas of micropayments. i'm sorry if my earlier post wasn't entirely
clear on that point. clay's article also did an excellent job at
describing the troubled history of micropayments, lots of promises and
nothing here today - a point i was trying to make. we attribute the
absence of a micropayment infrastructure to different things. i believe
that micropayments aren't here today because of a lack of open
standization and cooperation. the lessons from internet version 1.0
have been forgotten. clay believes the blame falls elsewhere (in the
notion of micropayments itself) and is 'unfixable'. anyhoo...

i believe clay's arguments, however intelligent he is, are
unconvincing. btw, i really do respect clay and his writing in the p2p
space is simply amazing. i just don't think his ideas here add up. so
now that the disclaimer is out of the way, this
is why i wholeheartedly support micropayments and reject the
aforementioned article's claims.

clay's article can be summarized fairly easily. he believes that
micropayments are going to fail because, as nelsonm also described, the
transaction cost includes the expensive consumer decision. he
makes the
claim that micropayments are a complex payment option and create user
anxiety. he attributes the failure of micropayment system adoption to
the fact that 'users hate micropayments.' hmmm...

i don't consider myself an abnormal consumer/user, and i would welcome
micropayments (as a consumer/user). why would an expanded, less limited
marketplace be a bad thing? which would i fret over less - an expensive
subscription or a quarter given to try something out? traditional $15
cds or 50 cent singles? i think i understand what both of you are
trying to say... that the $0.50 single might be less than the cost of
the decision. ok, so let's give the decision cost some form of
quantification - say it costs 50 cents. then we have the cost up to a
buck. in a traditional payment setting i've seen singles for like $4.
the decision for that (traditional) transaction is going to be higher,
but we'll ignore that for now. so we have $1 vs. $4. users hate better
prices? maybe i'm just not catching the point here, though as it seems
so obvious to me. i almost have to be missing something. and i'm sorry
if i'm learning this slow. thanks for all the help. :)

clay says, "Beneath a certain price, goods or services become harder to
value, not easier, because the X for Y comparison becomes more
confusing, not less." i agree with this. deciding at prices in the
$0.01 cent are difficult but another range of prices, in the $0.25-$0.50
range are also impossible (using open, accepted technology) today. i
*can* think very clearly and easily about those prices. and
micropayments open up that price range market.

another point of clay's i want to take issue with is where he states,
"... users will be persistently puzzled over the conflicting messages o
'This is worth so much you have to decide whether to buy it or not' and
'This is worth so little that it has virtually no cost to you'..." i
think that we're learning value != price.

i'm sorry i'm linking to jakob so much, but what he says really hits
home for me. i think a lot of micropayment opponents (not necessarily
clay) basically want everything to remain free, relying on status quo
advertising financing, and labors of love. which would be great! i
don't really mind advertising all that much. but it's just not realistic!
micropayments really 'fit' lots of problems.

the one statement that leaves me a little worried is where clay writes,
"... (businesses) that use micropayments offline share one
characteristic: They are all monopolies or cartels ...". and he gives
familiar examples of phone/electric. is that true?
i am having a difficult time thinking of a counterexample. it is
disturbing if the only time micropayments are used offline are where the
consumer has no choice. perhaps this can be attributed to simply the
typical low cost of information-ish goods/services as opposed to
physical goods/services found offline.

as netdancer stated, what are the alternatives? financed through
advertising? that doesn't work anymore, advertisers surely won't
continue to throw dollars at ads that just don't work.
subscriptions cause me more decision anxiety and lock me in.
aggregation == subscription. the list goes on...

Obviously, if the "transaction cost" is $0.25 per "banking transfer," you probably don't want to do a transfer
for every $0.01 "micro-tip."

On the other hand, if I pay for 200 $0.01 "microtips" via one transfer to a middlecritter, and
that middlecritter groups together 4000 $0.01 "microtips" together to give to a recipient, the efficiency rises
Rather A Lot.

The critical thing to do to implement this is to create a reasonably "open" sort of "microbanking" industry.

A not-unreasonable thing to do would be for "microtips" to basically just be "clicks" that drop a few bits
of information onto a server:

Who's the would-be payor?

Who's the would-be payee?

Perhaps some information on what the "tip" is about, such as date/time, and some bit of info to identify
(say) a piece of music or a book or a web site...

At the end of the month, after dropping 500 "tips" into the bucket, I might take a look at an overview report, and
approve/increase/deny actual transfer of the "microtips" to the recipients en masse. Note that increase
part; if I concluded, at end of month, that a particular piece of music was truly wonderful, I might send the
group a $5 tip rather than merely $0.01...

Ideally, this should result in a standardized protocol so that lots of organizations could run "microtip servers,"
so that this wouldn't be a bottleneck where (say) someone like
Amazon.com winds up exerting strict control over who can receive "microtips."

jim carrico, known as dinsdale here on
advogato, sent some informative email to me regarding his draft potlatch protocol. he put the
contents of that email on his current diary/activitiylog
until he has a certificiation level permitting him to contribute to the
discussion here. it is to his email that i am replying here...

jim,
first of all, i want to say that the protocol is really quite thought
provoking. especially in regard to the payment being backed simply by
the issuer's (buyer's) reputation. thank you for thinking out of the
box and pushing next generation payment technology forward! i apologize
for my earlier post in which, after rereading it, i feel contained much
too harshly worded criticism of your protocol (such as 'doomed to
failure [insert dramatic chord here]' :). sorry bout that. i'll try to
think before i write next time.

with respect to a reputation system, advogato is indeed a pioneering
effort in the field. its chief benefit being an almost completely
automated transfer of trust/reputation with a network flow model . i'm not
sure who or what would be assigning trust in your proposed payment
system though. anybody? artists? aggregators? and the most important
unanswered question w/ regards to advogato's trust model -- who/what are
the seeds of the trust computation? perhaps benevolant overseeers?
advogato would indeed provide an easy (automated) mechanism to avoid
unjustified spamming/blacklisting a certain issuer of potlatch currency.

conceptually, you might also be able to glean some information from
jakob nielson's reputation manager alert box(es) (1, 2) from back in the
day.

now, to raise some concerns and questions.

you state, "... If the payment is voluntary, there is no reason to cheat
..." but i thought we were dealing with a protocol that could be used
for mandatory payments as well ;-)

even if the payment option being used was voluntary, people like to do
mean and stupid things. i could make the argument that there's no
reason for script kiddies to DoS nice people... but alas. people are
mean and stupid. but also, kind and intelligent. :)

previously, i mentioned security concerns... basically that artists
could use the receipts more than once -- similar to the well known and
understood replay
attack (kinda poor link, sorry). the signed note has to have a
lifetime of one transaction, no more. we know that the payment was
authorized by the consumer because of the message authentication
provided by the signature (digital certificate). but we don't know if
the payment is intended to be authorized *this* time because the
exchanged data has nothing associating the token with this transaction
-- something like a session key generated from random values... i'm
getting mudied here in the details. i apologize.

you rightly pointed out that fraud could be detected and tracked. that
is very true. but wouldn't it be better (especially in the light of the
ever important transaction cost) to completely avoid the possibility
of fraud? with the present design, every transaction needs to be
verified. whether or not the verification takes place before or during
soliciting payment from the paying consumers is a minor detail. the
point is that this verification could be very costly. either receiving
a "what the heck, i already paid you idiots!" from the consumer, or a
distributed aggregate database lookup to see if that timestamp was
already used. mslicker pointed out that if the token had a particular
aggregator as a field, it would at least be a local database lookup.

anyways... what i'm trying to say, is that i find the notion of
'token'-based payment ummm,..., difficult for internet use. in my first
payment protocol attempt, brp (broker receipt protocol) my choice of a
token-based payment method was an infinite source of frustration. in
fact, i decided to scrap it and redesign.

moving on...

you wrote, "For instance if i was running an aggregator i wouldn't
accept
any of these promissory notes without the stipulation that they
would be returnable
if the payer didn't actually pay - (eg. the next time i make an
aggregate "buy" from
that artist - this is the way newstands handle magazine
distribution, they buy N
magazines, sell M, and return N-M (with the covers removed) to
the distributor for
credit the next month) "

isn't that market friction? it just seems to me that pending payments
create lots of costly risk and other associated effort. like i've
previously stated here, i really like the debit model. although it
doesn't really jive with a common definition of micropayments, where we
sit and collect payments and then make a transfer... i still think it's
less costly overall because risk and all that stuff is really
expensive. a network transmission lowers in cost everyday, risk
doesn't. hope this understandable.

argggh, previewing this post reveals that there is so much that i am
leaving unclear. but i told you i'd post some more thoughts
(yesterday!), so here they are. please take the above as constructive
criticism, and really the protocol is quite elegant and workable. i'm
just nit picking. something that we have to do though, if we want our
payments to scale.
:)

two cents
is a nice easy small fixed value way of getting small donations.
The e-gold shopping cart interface is easy to use as well, pinch an example page and change
account numbers and link targets.
It would not be very hard at all to have either voluntary or mandatory
payments for accessing work, best of all is that of cost, free to set
up and very small (much less than credit card) margins on transactions,
1% capped at US$0.50

Assuming that most people here are in favor of digital content
distribution (read: 'Napster', 'gnutella', etc.), has anyone actually
come up with a model to get some money to content creators? I think they
have a right to it.

I actually posted an answer to that question on Advogato a number of
months ago. The Advogato version is here, or you may want to
check out a later, somewhat revised version here.

Well, I wasn't answering that question precisely. I was going on the
assumption that systems which guarantee that consumers pay for exactly
what they use are inefficient and unworkable, equivalent to paying for
roads by installing a tollbooth at every street corner. So instead, I
was answering the question "How can artists distribute their work such
that it's freely redistributable but still make money?"

Most comments here take for granted that an artist/author/musician
_has_ to get paid for their creation. I want to question this assumption

I don't have any statistics to back this up, but I believe
that most artist (whatever that means), do not in fact get their main
income from selling their creation. And I know for where I live
(Estonia), that it is almost impossible to make a living as an author.
Main income comes from grants and newspaper articles in fact.
In the world, there are a few authors, who make
millions of dollars from one book, and there are millions that make a
few dollars. Same with music, where the margins are probably even more
drastic.

The current system is clearly centered around publishers and
the industry in general. To get published and advertised, you have to
cross a threshold. That means being a genius (small percentage of us),
nagging each and every publishing house you know, being turned down or
generally trying to _sell_ a _piece of art_. A better alternative would
be to give it away for free.

Ok, I know that bills have to get paid and kids fed, right. But
before shooting me, please consider the following:
When you give quality stuff for free, you tend to get noticed (Pick an
Open Source hacker of choice).
When you are noticed, you might eventually become more or less famous
(Philip Greenspun - www.greenspun.com for example)
When you are more or less famous, you probably will be hired by someone
not for what you have done, but for what you might do in the future
(Linus Torvalds in Transmeta)

This system is by the way the classical Hollywood stereotype - in
order to get a part in a movie, you have to sleep with someone in
charge. That is _you_ give _them_ something. In return people will
notice you and after a while _they_ might be willing to give _you_
something (money).
Never been to Hollywood though ;)

But seriously - when you think about it, being able to sell your work
requires a lot of effort anyways. Why not channel that effort into
public good. Unless ... the current system is a natural filter that
blocks most of the crap (and some good stuff in the process).

And after all - creating artistic content is pain. That's why artist
have this ... image. And value of art cannot be expressed in money. So
don't.
Of course - my comments implies some artistic value in the work.

New Advogato Features

New HTML Parser: The long-awaited libxml2 based HTML parser
code is live. It needs further work but already handles most
markup better than the original parser.